The reduction in property exposure (Dec2005) to the lowest limits allowed by the fund's respective mandates has helped to protect capital values in the recent downturn. This has had no impact on the quarterly income, which remains predictable and reliable. (Please note: The income from the Marriott Income Fund is affected by interest rate movements.)
With an expectation of further interest rate hikes over the next 6 months, it is likely that we will continue to avoid any long bond exposure and keep property to the minimum levels. In light of this we have further reduced the property exposure in the Core Income Fund from 9% to 3%.
It is difficult to predict the likely impact of further rate hikes on the property market, however we would recommend a conservative asset allocation as negative sentiment could continue to drive prices down. Should this happen, it would give us the opportunity to reinvest a portion of the cash back into property and long bonds at more appropriate prices. In doing so we would be purchasing higher yields (cheaper income streams), which would translate into income growth for investors.

The reduction in property exposure (Dec2005) to the lowest limits allowed by the fund's respective mandates has helped to protect capital values in the recent downturn. This has had no impact on the quarterly income, which remains predictable and reliable. (Please note: The income from the Marriott Income Fund remains dependent on interest rate movement.

With an expectation of further interest rate hikes over the next 6 months, it is likely that we will continue to avoid any long bond exposure and keep property to the minimum levels.

It is difficult to predict the likely impact of further rate hikes on the property market, however we would recommend a conservative asset allocation as negative sentiment could continue to drive prices down. Should this happen, it would give us the opportunity to reinvest a portion of the cash back into property and long bonds at more appropriate prices. In doing so we would be purchasing higher yields (cheaper income streams), which would translate into income growth for investors.

Distribution
The March 2006 distribution amounted to 2.0200 cents per unit (December 2005: 2.2069 cpu), bringing the total distribution for the last four quarters to 9.39 cents per unit.

Future Income
There is currently no exposure to listed property within the fund. The fund is entirely exposed to cash and near cash, being deposits and A rated bonds with a maturity of less than 3 years. As a result, the only change to income will be as a result of interest rate movements. Should interest rates change, however, there would be a negligible change to income per unit based on the current asset allocation and hence distributions will remain stable over the next few quarters.

Capital
The current asset allocation, being mostly cash and deposits with a 30% exposure to a 2 year bond, offers a very high level of capital stability to investors. Investors seeking a higher yield would be better placed in the Marriott Core Income Fund.

Distribution
The December 2005 distribution amounted to 2.2069 cents per unit (September 2005: 2.3927 cpu), bringing the total distribution for the last four quarters to 9.4060 cents per unit. This equates to an historic yield of 8.61%.

Future Income
There is currently no exposure to listed property within the fund. The fund is entirely exposed to cash and near cash, being deposits and A rated bonds with a maturity of less than 3 years. Should interest rates change, there would be a negligible change to income per unit based on the current asset allocation and hence distributions will remain stable over the next 2 quarters.

Capital
During the quarter, the exposure to the R152 was reduced to increase the capital stability of the fund. The current asset allocation now offers a very high level of capital stability to investors. Investors seeking a higher yield would be better placed in the Marriott Core Income Fund.